In addition to earning a diploma, learning good financial skills is one of the most important things you can do as a college student. Developing strong money management habits now establishes the groundwork for a solid financial future, as well as provides the foundation you need to achieve your dreams – whether it’s to build your own company, provide for your family, buy a home or travel the world.
According to Forbes.com, today nearly 60 percent of college students graduate with $20,000 or more of debt. It can be difficult to recover financially when you carry this much debt at a young age. It also can translate into serious financial problems in the future. Unfortunately, many Americans reach adulthood without mastering money management, which ultimately can lead to even more serious problems like bankruptcy. In fact, according to the U.S. Administrative Office of the Courts, personal bankruptcies increased 31 percent from 2007 to 2008.
So, what can you do as a college student to set the stage for financial success and avoid graduating with a mountain of debt?
Money Management Tips for College Students
First, make your finances a priority. Then follow these simple money management tips to get started down the path to a brighter tomorrow.
Set clear goals – Goal setting is the first, and most critical, step in the financial planning process. As with any undertaking, if you aren’t sure where you want to go, it’s impossible to determine how to get there. Decide where financially you want to be in one year, five years, and 10 years. Make a list, and be sure your goals are realistic. Important questions to consider include:
- How much money will you need to pay for your college education? Include all of your living expenses, not just tuition. How important is it to graduate debt-free? Will you need loans, or a job?
- What expenses will you have post-graduation? Will you need money to pay student loans, finance graduate school, buy a new car or relocate?
- What current expenses do you have? Which are discretionary versus necessary ? Do you have a steady income?
- What are your long-term goals? Would you like to buy a home? Save for retirement?
Establish a plan – Once you’ve selected your goals, it’s time to create your financial plan. This includes developing a budget, as well as evaluating what money management tools can help you achieve your goals the fastest.
- Create your budget – Perhaps one of the most difficult tasks when it comes to money management for college students is creating – and sticking to – a budget. If you need help, there are plenty of online resources, which can guide you through the process. If you prefer a more hands-on approach, ask your parents or a professional for advice. As a free service, banks and other financial institutions often have financial advisors who can provide recommendations based on your personal needs, circumstances and goals.
Evaluate money management tools – Whether you’re creating an emergency fund, saving for college, retirement, or a down payment on your first home, the sooner you start, the easier it will be to reach your goal. You should evaluate these common items found in a student’s financial toolkit:
Student bank accounts – Most banks offer student accounts with low or no minimum balances and fees. In addition to a savings account, you may need a checking account to pay rent, etc. Before switching banks or applying for a new account, consider:
- Access – Will there be an office or ATM located near campus? Would you like to give your parents access to your account? If so, does the bank provide convenient access for them, too?
- Fees – Are there any monthly fees? What types of charges can you expect in the event of an overdraft , use of an ATM or a dip below the required minimum daily balance? Will you need to purchase your own checks, or will they be provided free?
- Perks – Value-added services, like mobile or Internet banking, as well as online bill payment services, can serve students well. When it’s inconvenient to go to the bank, you can manage your finances online, and help protect your credit rating by ensuring your bills are paid on time, etc.
- Limitations – Are there any limitations on the number of monthly transactions you can have? Does the account or bank have any other restrictions? If so, will you be comfortable with them?
- Student bank accounts – Most banks offer student accounts with low or no minimum balances and fees. In addition to a savings account, you may need a checking account to pay rent, etc. Before switching banks or applying for a new account, consider:
- Student credit cards – A credit card be a life-saver when it comes to emergencies, as well as convenient when it comes to financing larger purchases, like books at the beginning of the semester. However, college students often rely on credit cards too heavily, and accumulate unnecessary credit card debt. According to Sallie Mae, today’s typical undergraduate college student holds 4.6 credit cards. In addition, college students are carrying record high balances on their credit cards – nearly one-fourth of students have a total balance ranging from $3,000 to $7,000.
Evaluate your progress – Priorities change, and so do your financial needs and circumstances. Reevaluate your priorities and financial plan on a regular basis — as a college student, once at the beginning and once at the end of each semester should be sufficient. Review your progress, and make adjustments as needed.
When it comes to your personal finances, it pays to do your homework. College is the ideal time to develop solid financial planning and money management skills that will serve you throughout your lifetime. The positive habits you develop today will set the stage for a secure financial future, as well as help make your dreams a reality. Following these money management tips can get you started, and a partner like Fifth Third Bank can help you reach your financial goals even faster.